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An Interview with M&A Source Member, Rich Jones

Tell us about yourself independent of your work?

I’m originally from New England but I had a nomadic childhood.  My family lived in New Hampshire, Vermont, Oregon, Idaho, and Virginia through my high school graduation; this resulted in a nuanced accent (southern in nature now) and a hodgepodge of sports teams I support.  My father was in the automotive industry and ran dealerships, ultimately owning one in southern Vermont.  I grew up in and around family-owned businesses (I spent numerous summers and weekends detailing recently purchased used cars) and grew an appreciation for every individual’s contribution to the culture (positively and negatively) of a company.  I graduated from the University of Virginia (unfortunate save college basketball for my fandom) with a B.S. in Finance and Management.

I’m married to a wonderful woman, Louisa, that I met in college, and we have four children:  Andie (15), Casey (13), Jackson (10), and McKenzie (8) that keep us busy and grounded.  I find (limited) time to pursue my passions of outdoor sports (namely snowboarding and mountain biking), reading, and live music while also taking part in my kids’ passions (predominantly performing arts and soccer).  Fortunately for me, the winter sports bug also afflicts my family.

Tell us about your career and how it led you to doing this work?

These pre-date my career but growing up my favorite magazine was Popular Mechanics, and I was known to take apart pens and small household appliances as a kid (regardless of whether they were broken).  While I pivoted from engineering in college, I still have a dying desire to understand how things work.

After graduating from the University of Virginia, I moved to New York to work for a global corporate finance consulting firm, Stern Stewart.  Unfortunately, 9/11 occurred within a month of my moving to New York, which beyond the deep impact this had on me personally, it also severely changed the demand for our expertise at Stern Stewart.  While I was fortunate enough to be staffed on a handful of engagements, I wasn’t learning at the depth and speed I was hoping to straight out of college, and I started looking for a new opportunity.  I joined McColl Partners (now Deloitte Corporate Finance) within a year of its formation.  I was an analyst at a fledgling investment bank that was extremely scrappy and full of incredible people.  After a two-year, tremendous, learning experience, I made the move into private equity in 2004.

Having grown up in and around family businesses, I grew to appreciate the culture and intimacy of small, family run businesses.  At McColl Partners, we typically partnered with entrepreneurs that were undertaking one of the largest decisions they made, selling their business.  While I liked being on the advisory side, I recognized I didn’t have the opportunity to dig deep on how things worked, and I liked the opportunity that investing in and partnering with lower middle market, privately owned businesses would afford me to scratch this itch.  I love it and have been doing it since 2004.

What personal characteristics and strengths have supported your success in this industry?

I inherited traits from each of my parents that have enabled me to be successful in this industry.  My mother is a nurse, is the consummate caregiver, and is extremely empathetic.  She also has an authentic and genuine interaction with everyone she meets.  I also approach interactions with people with a deep desire to understand their situation and perspective.  The businesses we invest in and partner with are comprised of people from many different walks of life.  I have been successful in connecting with most and I think this is directly related to the traits I inherited from my mom.  My father was an entrepreneur, very driven, and curious to understand how things work.  Similar to my dad, I’m hardworking and have a strong desire to understand how things work and apply that knowledge to how things can be improved.  The combination of these traits enables me to get to a good base level understanding of how businesses work but in a manner that doesn’t lose sight of the human component of a business.

What is your greatest M&A accomplishment?

I’m most proud of the team we have assembled at Zabel.  Our team has significant experience in the lower middle market, and most impactfully, has passion for supporting the growth and development of the people that comprise our partner companies.  We strive to maintain and enhance a place where people are proud to come to work every day.

With regard to the majority of your engagements, do you work as a team, or do you handle things on your own?

We are a small, nimble team of six investment professionals and two administrative professionals.  While we form investment teams of three, we are thoughtful in terms of allocating our resources to ensure we remain focused on advancing our highest priority items efficiently.  In doing so, we are all afforded the opportunity to work autonomously on certain projects that make up any one investment.  This also provides unique development opportunities for all on the team.  Importantly, we come together to ensure we are getting the most value from the diversity of our perspectives when making material decisions related to an investment.

What is the biggest mistake you have made when working on a deal?

Early in my career I was working through a challenging financial situation with the accounting team at one of our investments.  I was eager to figure it out and I let that drive eclipse the importance of checking in on where someone was personally.  The person almost quit; fortunately, a senior leader in the business called me on it.  I immediately stepped back and acknowledged my mistake to this person.  While I had a good relationship with this individual, I didn’t check in personally and I let my drive and excitement surpass the human aspect of the work we do.

What are the three most important qualities that you think a good M&A [advisor/ professional] needs to have?

Being curious, candid, and open minded has served me well during my career.  Curiosity helps me get to the root of a situation faster than waiting to be told what I may want to hear.  Additionally, it’s been proven to me more than once, that looks, at first pass, can be deceiving, and a curious mind helps me get to the reality of a situation.  Candor saves everyone time.  In dealing with intermediaries and sellers, there is no sense in beating around the bush.  If it’s not pretty, it’s going to be found and better to deal with it head on and collaboratively work on a solution or quickly accept that there isn’t a path forward.  The added benefit of curiosity and candor is that it typically results in a reciprocal relationship, which is beneficial to all parties.  Finally, having an open mind has resulted in numerous right decisions being made that weren’t initially my chosen path. There are typically many solutions to a problem and the right one may not be the first one you come across.

What is the most interesting investment that you are working on today?

This is a tough one, while there are a lot of similarities investment to investment, each investment usually has a unique aspect that provides me with a new opportunity to learn and grow that makes it interesting in its own way.  So I don’t completely pass on this question, we are invested in Stan’s Performance Products, a manufacturer of service and maintenance products for the biking industry.  I love to mountain bike, so this investment has a tangible relationship to something I do outside of work.

How long have you been an M&A Source member and what do you get out of your membership?

I’ve only been a member for a couple of years, but I’ve been attending the M&A Source Deal Market for over ten years.  I’m able to brainstorm potential solutions to questions I’m struggling with and learn about industries from folks that understand our industry and the lower middle market.  My association with M&A Source has yielded friendships that will surpass my time in the industry.  Finally, we’ve closed three investments that we were introduced to at the Deal Market.

What changes and trends do you see on the horizon that will impact M&A?

I think the universe of buyers will continue to evolve and diversify.  It used to be that you could sell to a strategic buyer, or you could sell to a private equity group.  Institutional partners are varied now, whether you are talking about family offices, search funds, independent sponsors, or traditional private equity groups.  Additionally, groups are becoming more specialized in terms of focus areas (industry, operational involvement, etc.).  This is great for sellers but can also be overwhelming.  While it’s important to match seller priorities with buyer strengths, at the end of the day, this is still a people-based business.  I think the importance of face-to-face interactions will persevere in the face of change.  Successful deals and investments result from a partnership built on a foundation of trust, which is easiest accomplished face-to-face.

What advice would you give to new people entering the industry?  

Recognize what you don’t know and be humble in finding people that do know and ask for help.  In general, this is a highly collaborative industry and people are more than willing to share their knowledge, be it related to an industry, a business model, or something technical like a structuring matter.  There isn’t much tangible in our industry, but one of the greatest assets to have in our industry is the ability to build and maintain strong relationships.

Please tell us something about yourself that has nothing to do with your M&A career?

I started skiing at five, started snowboarding at 20 and was successful in getting each of my kids on skis by age five.  Being on a mountain in the winter with my family or by myself is something that gives me a tremendous amount of happiness.

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